United Drug Co. v. Gramling-Belcher Drug Co. , 216 Ala. 79 ( 1927 )

We infer from the briefs of counsel that judgment was rendered for defendant by the trial court on the theory that his copartner, Belcher, was without authority to bind him by executing the notes in question in the name of the partnership, either because giving the notes was not necessary to carrying on the business in the ordinary manner (Code 1923, §§ 9375, 9376), or because defendant himself refused to sign the contract or the notes given pursuant thereto, when Belcher talked with him about it and proposed it, or because defendant notified plaintiff's agent that he would not sign the notes.

Section 9375 of the Code declares:

"Every general partner is agent for the partnership in the transaction of its business, and has authority to do whatever is necessary to carry on such business in the ordinary manner, and for this purpose may bind his copartners by an agreement in writing."

Section 9376 enumerates the things a partner, as such, may not do, including:

"(7) To do any other act not within the scope of the preceding section."

We do not understand that section 9375 of the Code, supra, in stating the general power of partners to bind the firm, effects any change in the pre-existing common law on that subject. It deals, of course, with implied powers, and the phrase "whatever is necessary" means no more nor less than "whatever is usual and appropriate" in the conduct of the business.

"It is a legal consequence of all mercantile partnerships, that each partner is the general agent of the firm, in all transactions within the scope of its business. Within the range of its ordinary business, his acts and engagements are as binding on the firm, as if all the members had united in them. * * * Each partner has an implied authority to make or indorse promissory notes in the name of, and binding on the firm, if they are made or indorsed for the benefit of the partnership, in the course of the partnership business." Hurt v. Clarke,56 Ala. 19, 22, 23, 28 Am. Rep. 751; Mauldin v. Branch Bank,2 Ala. 502, 511; 20 R. C. L. 882-884, § 94; Id. 901, § 112.

And "in the case of a commercial partnership it is always presumed that when a member of a firm borrows money, or gives a note in the name of the firm, the transaction is for a partnership purpose, and the burden of proof is on the firm to show the contrary, and a contract made by a partner in the name of the firm is prima facie binding on the firm unless it is made outside of the firm business." 20 R. C. L. 892, § 103, citing numerous cases; note to Baxter v. Rollins [Iowa] 48 Am. St. Rep. 439. As said by this court in Knapp v. McBride, 7 Ala. 19,27: "Where a note made by one partner in the name of the firm is put in suit, it is not incumbent on the plaintiff in the first instance to show that the note was given for a partnership transaction. It will be intended to have been made in the course of partnership dealings; and [if the contrary is true] * * * these facts must be shown in the defense by the party taking advantage of them."

The fact that Gramling disapproved the making of the contract with plaintiff, and personally refused to sign the notes, could not per se avoid the liability of the partnership on the notes given by Belcher.

But defendant relies on another principle:

"Both in England and the United States, there are cases which assert the general proposition, that a partner may protect himself against the consequences of a future contract, by giving notice of his dissent to the party with whom it is about to be made. * * * And where the firm consists of but two persons, and there is nothing in the articles to prevent each from having an equal voice in the direction and control of the common business, the correctness of the proposition cannot be questioned [italics supplied]." Johnston v. Dutton's Adm'r,27 Ala. 245, 252.

One trouble with defendant's contention here is that, under the articles of partnership, his copartner, Belcher, was to have the general management of the business and make ordinary purchases and sales. There is nothing to indicate that the buying and handling of the Rexall goods was outside the scope of the general management of a drug store, or that it was an extraordinary undertaking for such a business.

In the case of Johnston v. Dutton, supra, further discussing the principle just above quoted, the court said:

"It is in strict analogy with the civil law, which holds where the stipulations of the partnership expressly intrust the direction and control of the business to one of the partners, that the dissent of the other would not avail, if the contract was made in good faith; * * * and such also, we think, is the rule of the common law. * * * Were it otherwise, it would be denying to parties the right to make their own contracts. If our views as to the governing force of express stipulations are correct, the effect of such terms or conditions as result by clear implication from the articles, or arise out of the nature of the partnership, must be the same."

Defendant's testimony shows very clearly the division of managerial authority between the partners, and that Belcher was expressly authorized to buy the goods to be handled and sold in the partnership business.

Again, while defendant says he notified plaintiff's agent that he would not sign the notes, he does not say or know when that was, whether before or after the contract of purchase was made by Belcher, or even before Belcher had signed the notes for the firm. On his own showing, therefore, he has not brought himself within the principle relied on.

It is very doubtful, also, if notifying the agent merely that he would not sign the notes himself, without dissenting from the contract about to be made or the notes proposed to be executed by the partnership, would be sufficient to avoid liability as a partner.

The application of the foregoing principles and conclusions to the undisputed facts in the case lead to the conclusion that the judgment for defendant was erroneous, and should have been for plaintiff for the amount of the notes sued for. A judgment will be here rendered accordingly.

Reversed and rendered.

ANDERSON, C. J., and THOMAS and BROWN, JJ., concur.